Definitions are written for UK sellers, creators, and self-employed people — practical context first, regulatory citation second. Each entry links to the official source on gov.uk or the platform’s documentation. If a term isn’t here, email hello@payoutmath.co.uk and I’ll add it.
A
ACX (Audiobook Creation Exchange)
Amazon's audiobook production and Audible distribution platform.
Amazon's platform for producing and distributing audiobooks via Audible. Royalty rates: 40% (exclusive to Audible, 7-year lock-in) or 25% (non-exclusive — distribute to Apple/Spotify/Google/Findaway too). Production models: self-narrated, royalty share (50/50 with narrator, no upfront), or pay-for-production (£100-£400/finished hour upfront). Audible credit-buyer pricing means most royalties calculate on ~£7.99 net price, not £14.99 list. Use the [ACX/Audible calculator](/acx-audible-royalty-calculator-uk/) for specific scenarios.
AEA (Annual Exempt Amount)
Tax-free CGT allowance — £3,000 for 2025/26 individuals (down from £6,000 in 2023/24).
The amount of capital gain you can realise in a tax year before paying Capital Gains Tax. £3,000 for individuals in 2025/26 (£1,500 for trusts). Significantly reduced from previous years: £12,300 in 2022/23, £6,000 in 2023/24, £3,000 in 2024/25 onwards. The AEA cannot be carried forward to future years if unused. Spouses/civil partners can use both allowances when assets are held jointly. The AEA is separate from the Personal Allowance (income tax), Trading Allowance, and Property Allowance.
B
BAD (Business Asset Disposal Relief)
Reduced 14% CGT rate (2025/26) on first £1m lifetime gains of qualifying business sales.
A reduced Capital Gains Tax rate for individuals selling all or part of a qualifying business or business asset. 14% rate (2025/26 onwards — increased from 10% in 2024/25) on first £1m of lifetime qualifying gains. Eligibility: have owned the business for at least 2 years before sale; been an employee/director if selling shares; held at least 5% of ordinary shares and voting rights. Often used by sole traders and small-company directors at retirement or sale. Combine with the Annual Exempt Amount for the full tax-efficient exit. Formerly known as Entrepreneurs' Relief (renamed BAD in March 2020).
Badges of trade
HMRC's test for whether activity counts as a business or is just personal selling.
A set of factors HMRC uses to decide if your activity is 'trading' for tax purposes: profit motive, frequency and organisation of transactions, nature of the asset, modification before sale, source of finance, length of ownership, and method of acquisition. Selling old personal possessions at a loss is generally not trading. Buying stock specifically to resell is trading. The line can be blurry — the calculator on this site can't make that judgement for you.
Buyer Protection fee (Vinted)
Fee paid by the buyer at Vinted checkout — never deducted from seller's payout.
Vinted's revenue model: buyers pay a Buyer Protection fee (3-8% + £0.30-£0.80 typically) on top of the listed price. Sellers receive 100% of the listed price. This makes Vinted unique among major UK resale platforms — there are no seller-side commission or processing fees on standard sales.
C
Capital Gains Tax (CGT)
Tax on profits from selling assets like property, shares, or business interests.
Tax charged on the profit (gain) when you sell or dispose of an asset that has increased in value. The 2025/26 annual exempt amount is £3,000 (down from £6,000 in 2023/24). Standard rates: 18% basic-rate / 24% higher-rate (residential property up from 28% in pre-2024); 18%/24% on most other assets. Business Asset Disposal Relief gives 14% rate (2025/26) on first £1m lifetime gains of qualifying business sales. Investors' Relief gives 14% rate on first £10m lifetime gains for unlisted trading-company shares. Carried interest taxed at 28% flat. Reporting deadline: within 60 days for residential property; otherwise via Self Assessment.
Class 1 National Insurance
NI paid by employees on PAYE earnings (and by employers on top).
The NI category for employees. Employee Class 1 NI: 8% on earnings £12,570-£50,270, 2% above £50,270 (2024/25 rates). Deducted at source via PAYE. Employers also pay Class 1 NI on employee earnings (13.8% on earnings above £9,100/year). Class 1 NI is reduced for employees who are over State Pension age. Different from Class 2 (effectively abolished April 2024) and Class 4 (self-employed). Different rates apply for directors and certain pension scheme members.
Class 2 National Insurance
Effectively abolished from 6 April 2024 for self-employed people.
Previously a flat weekly NI contribution (£3.45/week) self-employed people paid alongside Class 4. From 6 April 2024 it was effectively abolished — self-employed people no longer pay Class 2 as a separate amount, and entitlement to State Pension is preserved automatically when profits exceed the Small Profits Threshold (£6,725).
Class 4 National Insurance
Self-employed NI on profits — 6% between £12,570 and £50,270, 2% above.
Class 4 NI is paid by self-employed people on profits. For 2025/26: 6% on profits between £12,570 and £50,270, then 2% on profits above £50,270. Charged through Self Assessment alongside income tax. Note this is on profits, not turnover — and it stacks with Income Tax.
CPA (Cost Per Acquisition)
Average cost to acquire one paying customer or qualified lead.
Performance-marketing metric: CPA = Total Ad Spend ÷ Conversions. The unit-economics test: CPA should be ≤30% of first-year customer revenue (rule of thumb), or paid back within 12-18 months including LTV. Different from CAC (Customer Acquisition Cost), which includes marketing AND sales costs (team salaries, tools, overhead). CPA is digital-marketing-narrow; CAC is fully-loaded.
CPC (Cost Per Click)
Average cost paid per click on a paid advertisement.
Dominant metric for paid search and lower-funnel performance campaigns: CPC = Ad Spend ÷ Clicks. UK Google Search benchmarks: e-commerce £0.30-£1.50, B2B SaaS £2-£8, finance/insurance £5-£15, legal services £10-£40+. Meta Ads typical: £0.20-£1. LinkedIn: £3-£8. Quality Score (Google) and ad relevance (Meta) reduce effective paid CPC — improving creative and targeting often cuts CPC 30-50%.
CPM (Cost Per Mille)
What advertisers pay YouTube per 1,000 ad impressions — gross figure, not creator earnings.
CPM is the advertiser-side metric: how much they pay for 1,000 ad impressions. It does NOT directly equal creator earnings — YouTube takes 45% before paying creators, and not every video view results in an ad impression. Use RPM for actual earnings calculations.
CTR (Click-Through Rate)
Percentage of ad impressions that result in clicks.
Engagement metric: CTR = (Clicks ÷ Impressions) × 100. Benchmarks vary enormously by platform: Google Search 3-5% (10%+ for brand keywords), Display 0.5-1%, Meta feed 1-2%, email 2-3%. Used as a Quality Score input on Google Ads — higher CTR typically earns lower CPC and better ad position. Optimise CTR through better headlines, ad extensions, audience targeting, and creative refresh every 4-8 weeks.
D
Digital Platform Reporting (HMRC)
Online platforms must report seller details to HMRC if you sell over 30 items OR earn over £1,700 in a calendar year.
Effective 1 January 2024, digital platforms (Vinted, eBay, Etsy, Depop, Airbnb, Uber, Fiverr and others) must collect seller information and report it to HMRC if either threshold is crossed. This is a *reporting* threshold, not a *tax* threshold — being reported doesn't mean you owe tax. HMRC cross-references reported data against Self Assessment returns. Casual sellers disposing of personal items at a loss owe no tax even when reported.
Discovery Mode (Spotify)
Optional algorithmic boost for streams — costs creators 30% off the per-stream royalty.
Spotify programme allowing eligible artists to push tracks into algorithmic recommendations like Radio and Autoplay. Streams generated through Discovery Mode are paid at a 30% lower per-stream rate. Useful for breaking past the 1,000-stream-per-year monetisation threshold or building initial momentum, but eats into earnings.
DistroKid
Music distributor that takes 0% of streaming royalties — flat annual fee model.
DistroKid distributes independent artist music to Spotify, Apple Music and other DSPs. Charges a flat annual fee (around £18 per year for unlimited releases as of 2026) and takes 0% of streaming royalties. Contrast with CD Baby (9% cut) or label deals (15-25% net to artist after recoupment). Royalties are paid to the artist's DistroKid balance, withdrawable to bank or PayPal.
F
Final Value Fee (eBay)
eBay's main selling commission — variable percentage by category, plus per-order fixed fee.
Charged when an item sells. Variable percentage depends on the item category and seller type (private vs business). Plus a fixed fee of £0.30 for orders ≤£10 or £0.40 for orders >£10. UK private sellers (since October 2024) pay zero FVF on most categories; only business sellers and international private sellers pay it. VAT is added to FVF for business sellers.
H
HMRC (HM Revenue & Customs)
The UK government department responsible for tax collection and customs.
His Majesty's Revenue and Customs is the non-ministerial UK government department responsible for collecting taxes (income tax, National Insurance, VAT, corporation tax, capital gains tax, inheritance tax, stamp duty), administering customs duties, and managing tax-related benefits including Child Benefit and Tax-Free Childcare. HMRC also enforces the National Minimum Wage and student loan repayments. From January 2024, digital marketplaces (eBay, Vinted, Etsy, Depop, Airbnb, Uber) report seller and worker activity to HMRC under the new Digital Platform Reporting Rules — sellers earning over £1,700/year or completing 30+ transactions are flagged. Self-employed individuals interact with HMRC via Self Assessment, MTD, and Government Gateway accounts.
K
KDP (Kindle Direct Publishing)
Amazon's self-publishing platform for ebooks, paperbacks, and hardcovers.
Amazon's direct-publishing service for independent authors. Royalty rates: 70% on ebooks £1.99-£9.99 (35% outside this range), 60% on paperback list price minus printing cost, 60% on hardcover. Print-on-demand for paperbacks/hardcovers — no inventory required. Authors retain rights and can update content anytime. KDP Select (90-day Amazon-exclusive option) gives access to Kindle Unlimited royalty pool and Kindle Countdown Deals. Use the [Amazon KDP royalty calculator](/amazon-kdp-royalty-calculator-uk/) for specific royalty modelling.
L
LTV (Lifetime Value)
Total revenue or profit a customer generates over their full relationship with you.
A unit-economics metric measuring how much revenue or profit a customer generates over the full duration of their relationship with your business. Calculated as: Average Order Value × Purchase Frequency × Customer Lifespan. SaaS LTV: monthly subscription × average retention months. The LTV/CAC ratio is the central health metric for any growth-stage business: 3.0+ is healthy, 4.0+ is strong, 5.0+ is excellent. Below 1.0: losing money on every customer. UK e-commerce LTV varies wildly: clothing £80-£200, beauty £150-£400, subscription boxes £200-£800.
M
Making Tax Digital (MTD)
HMRC's digital tax filing requirement — VAT-registered businesses, then self-employed/landlords by 2026/27.
HMRC's programme to digitise the UK tax system. MTD for VAT (2019): all VAT-registered businesses must keep digital records and file VAT returns through HMRC-recognised software. MTD for Income Tax Self Assessment (Phase 1, April 2026): self-employed individuals and landlords with combined gross income above £50,000 must keep digital records, submit quarterly updates, and file an end-of-period statement. MTD ITSA Phase 2 (April 2027): threshold drops to £30,000. Phase 3 likely 2029: threshold drops further (under consultation). Compatible software includes Xero, QuickBooks, FreeAgent, FreshBooks, and HMRC-listed alternatives.
Making Tax Digital for Income Tax (MTD ITSA)
Mandatory digital quarterly reporting from April 2026 for sole traders and landlords with qualifying income over £50,000.
Replaces the annual Self Assessment process for in-scope individuals with five submissions per year: four quarterly updates plus a final declaration. Effective from 6 April 2026 for sole traders and landlords with combined gross self-employment + property income above £50,000 in 2024/25. Threshold drops to £30,000 from April 2027 and £20,000 from April 2028. Requires MTD-compatible software.
N
National Insurance
UK social-security contributions paid alongside income tax.
A separate tax that funds state pensions, NHS, unemployment benefits, and other social-security programmes. Class 1 NI is paid by employees (8% on earnings £12,570-£50,270, 2% above) and employers. Class 2 NI was effectively abolished in April 2024 for self-employed (entitlement to State Pension preserved automatically above the Small Profits Threshold of £6,725). Class 4 NI is paid by self-employed (6% on profits £12,570-£50,270, 2% above £50,270 in 2024/25). NI bands typically mirror income tax bands but with different rates. NI is administered by HMRC alongside income tax.
O
Offsite Ads (Etsy)
Etsy's external ad programme — 12% or 15% additional fee, only on sales attributed to ads.
Etsy buys ads on Google, Facebook, Instagram and Pinterest pointing to seller listings. Sales attributed to those ads incur an additional fee: 12% if your annual sales exceed approximately £8,000 — mandatory enrolment at this level — or 15% below that threshold (opt-in possible to opt out). Capped at approximately £80 per order. Only triggers on attributed sales, not every sale.
P
PAYE (Pay As You Earn)
UK system for collecting income tax and NI from employee wages at source.
The system employers use to deduct income tax and Class 1 National Insurance from employee wages before paying them. HMRC issues each employee a tax code that determines how much tax to deduct. Employees with simple PAYE-only income (single job, no other income) typically don't need to file Self Assessment. PAYE handles tax-free Personal Allowance, basic-rate, higher-rate, and additional-rate band transitions automatically through the year. Side-hustle earnings above £1,000/year typically require Self Assessment registration even if main income is via PAYE.
Personal Allowance
£12,570 of tax-free income per year (2025/26), across all sources.
The amount you can earn from any source before paying Income Tax. £12,570 for the 2025/26 tax year. Tapers away by £1 for every £2 you earn over £100,000, so anyone earning above £125,140 has no Personal Allowance at all. The Personal Allowance is separate from the Trading Allowance and the Property Allowance.
POD (Print On Demand)
Manufacturing-on-order model — items printed and shipped only after sale.
A retail/print model where products are manufactured only after a customer order is placed. No inventory risk, no upfront stock costs. Common platforms: Printful, Printify, Gelato, Amazon Merch on Demand. Used widely for t-shirts, mugs, posters, books (KDP), and accessories. Per-unit cost is higher than bulk manufacturing, but eliminates inventory risk and storage costs. Margins are typically 20-40% after platform + processor + shipping. Use the [Printful margin calculator](/printful-margin-calculator-uk/) or [Amazon KDP calculator](/amazon-kdp-royalty-calculator-uk/) for specific POD modelling.
R
Regulatory Operating Fee
Small percentage fee platforms charge to cover Digital Services Tax and similar regulatory costs.
Both Etsy (0.32% UK) and eBay (0.35% business / 0.42% private international) apply a small Regulatory Operating Fee on every UK sale. Introduced around 2021 to recover costs of Digital Services Tax and similar local regulations. Often missed by older fee calculators.
ROAS (Return On Ad Spend)
Revenue earned per pound of advertising spend.
A performance-marketing efficiency metric: ROAS = Revenue ÷ Ad Spend. £4 ROAS means £4 of revenue for every £1 spent. Healthy benchmark depends on margin: at 50% gross margin, breakeven ROAS is 2.0; above 4.0 is profitable. Different from ROI: ROAS measures revenue, ROI measures profit. UK e-commerce typical ROAS targets: 3.0-5.0 prospecting, 8.0-12.0 retargeting. Use the [ROAS calculator](/roas-calculator/) to model your specific ad-spend efficiency.
RPM (Revenue Per Mille)
What you actually earn per 1,000 video views, after YouTube's 45% cut.
RPM is the creator-side metric for ad revenue: total earnings divided by total views, multiplied by 1,000. It accounts for non-monetised views, skipped ads, viewer geography, ad blocker rates, and YouTube's 45% revenue share. Always lower than CPM. UK creators in 2026 typically see RPMs between £1 and £8 for long-form content, much lower for Shorts.
S
SaaS (Software as a Service)
Software delivered via subscription, hosted by the provider.
A software delivery model where users subscribe (typically monthly or annually) to access cloud-hosted software, rather than buying licenses for installation. Examples: Xero, Slack, Shopify, Microsoft 365. Differs from traditional software in business model (recurring revenue), distribution (web/cloud), and customer relationship (continuous). SaaS pricing tiers typically follow ~£10-£50/user/month for SMB tools, £100-£500/user/month for enterprise. SaaS-specific metrics: ARR (Annual Recurring Revenue), MRR (Monthly Recurring Revenue), churn rate, expansion MRR, NPS.
SBP (Small Business Program — Apple)
Apple App Store reduced rate (15% vs 30%) for developers earning below threshold.
Apple's reduced commission programme for small developers. 15% commission instead of standard 30% on App Store paid apps and in-app purchases. Eligibility: total proceeds below the annual threshold (about £800k-equivalent globally). Opt-in via App Store Connect — even eligible developers must enrol. Loss of eligibility (crossing threshold mid-year) moves you to 30% for the rest of the calendar year; re-enrolment available the following year if you drop below. Most indie UK iOS developers qualify and benefit by £15k-£75k/year.
Scottish income tax bands
Different from rest-of-UK; Scotland has six bands from Starter rate (19%) to Top rate (48%).
If you live in Scotland, Scottish income tax bands apply to your non-savings, non-dividend income. Scottish bands include a Starter rate (19%), Basic rate (20%), Intermediate rate (21%), Higher rate (42%), Advanced rate (45%), and Top rate (48%). National Insurance is unchanged — set at UK level, not Scottish. Personal Allowance still £12,570.
Self Assessment
HMRC's tax return system for people whose tax isn't fully handled by PAYE.
If you have self-employment income above £1,000, untaxed savings or property income, or any other income HMRC needs to know about, you must register for Self Assessment by 5 October following the tax year end. Returns are filed online by 31 January (or 31 October on paper). Tax owed is paid by 31 January, with payments on account potentially due 31 January and 31 July.
Spotify 1,000-stream royalty threshold
Tracks must reach 1,000 streams per 12 months before Spotify pays any royalty on them.
Introduced November 2023, Spotify requires a track to accumulate at least 1,000 streams in any rolling 12-month period before it earns any royalty. Tracks below the threshold earn nothing. Designed to redirect micro-royalties from low-activity tracks to more-streamed content.
T
Trading Allowance
£1,000 of tax-free trading or casual self-employed income per tax year.
A flat £1,000 tax relief introduced by HMRC in April 2017 for casual self-employed income, freelance work, online selling and similar activities. If your gross trading income for the tax year is at or below £1,000, you owe no tax and don't need to register for Self Assessment. Above £1,000, you can either deduct the £1,000 allowance from your gross income (simple, no expense tracking needed) or claim your actual business expenses — whichever gives the lower taxable profit. You cannot use both methods. The trading allowance is separate from the Personal Allowance and from the Property Allowance.
V
VAT (Value Added Tax)
UK consumption tax — standard 20%, with thresholds for mandatory registration.
A consumption tax charged on most goods and services in the UK. The standard rate is 20%, with reduced rates of 5% (energy, children's car seats) and 0% (most food, books, children's clothing). UK businesses must register for VAT if their VAT-taxable turnover exceeds £90,000 in any rolling 12-month period (2024/25 threshold). Below the threshold, VAT registration is voluntary. Once registered, you must charge 20% VAT on standard-rated sales, can reclaim VAT on most business expenses, and submit quarterly VAT returns. EU VAT rules continue to apply for cross-border digital sales below £8,818/year (post-Brexit OSS thresholds).
VAT registration threshold
£90,000 of taxable turnover in any rolling 12-month period.
If your VAT-taxable turnover exceeds £90,000 over any 12-month rolling period, you must register for VAT within 30 days. You can register voluntarily below this threshold if it benefits you (for example, to reclaim VAT on inputs). Most side-hustles never reach this threshold.